No. 13123 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

BILL McCARTER, 

Plaintiff and Respondent, 

GLACIER GENERAL ASSURANCE COMPANY, 

Defendant and Appellant. 

Appeal from: District Court of the Ninth Judicial District, 

Honorable Frank Blair, Judge presiding. 

Counsel of Record : 

For Appellant : 

Alexander, Kuenning, Miller & Ugrin, Great Falls, 

Montana 

John H. Kuenning argued, Great Falls, Montana 

For Respondent: 

Morrow, Nash and Sedivy, Bozeman, Montana 

Edmund P. Sedivy argued, Bozeman, Montana 

Submitted: December 3, 1975 

Decided : FEfj 10 'lQ-76 ., ' 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

An insured farmer sued his insurance company to recover 

payment for losses allegedly due under two crop insurance policies. 

The district court of Toole County, Hon. Frank E. Blair, district 

judge presiding without a jury, awarded judgment to the insured 

farmer in the amount of $121,640.20, interest and costs. Defendant insurer appeals from this judgment. 

Plaintiff is Bill McCarter, a farmer who raises winter 

and spring wheat on lands in Toole County, Montana. For several 

years prior to and including 1973, he insured his crops against 

hail damage and other risks with the Federal Crop Insurance Cora 

poration. In late 1972 and early 1973 he applied for and purchased 

additional crop insurance from the defendant, Glacier General 

Assurance Company. 

In his application for the additional Glacier Insurance, 

McCarter disclosed that he had other crop insurance covering the 

same perils, viz. Federal Crop Insurance. The Glacier Insurance 

was referred to as Multiple Peril Crop Insurance. It covered not 

only the standard hail and fire risks (designated "A" perils), 

but also losses due to weather conditions such as drought, flooding, freezing, windstorms and the like (designated "B" perils). 

McCarter paid a separate premium for coverage of "B" perils. "B" 

perils, unlike "A" perils, were subject to a pro rata clause 

limiting the insurer's liability to that proportion of the loss 

that the amount of its insurance bears to the total insurance. 

Glacier issued two Multiple Peril Crop Insurance policies 

to McCarter. One policy covered winter wheat and the other 

covered spring wheat. Each policy covered both "A" and "B" perils. 

McCarter paid all premiums for both policies. He was charged the 

same premium he would have been charged had he not carried the 

Federal Crop Insurance. 

In 1973 McCarter suffered severe losses to his winter and 
spring wheat from drought. Settlement for these losses under 

his Glacier policies could not be effected, however, and the 

instant action resulted. 

The case was submitted to the district court for decision 

on the basis of an agreed statement of facts, four depositions, 

and the testimony of McCarter and another area farmer at the trial. 

The material facts are largely undisputed. The chief battleground concerns essentially legal questions, principally the 

validity and construction of the pro rata clause in the Glacier 

policies. 

The district court held the pro rata clause in the policies 

unlawful, void and unenforceable. McCarter was awarded judgment 

as though the policies contained no pro rata clause. The amount 

of the judgment was $121,640.20. The district court made an 

additional and alternative conclusion of law that if the pro rata 

clauses in the two policies were valid, the clauses should be 

interpreted and construed to require a total payment of $112,213.70. 

Glacier appeals from the judgment. 

The issues on appeal can be summarized in this fashion: 

(1) Is the pro rata clause in the Glacier policies void 

and unenforceable? 

(2) If not, how should it be interpreted, construed and 

applied? 

Glacier contends that the pro rata clause covering "13" 

perils is valid and enforceable for a variety of reasons: (1) It 

does not contravene Montana's unfair discrimination statute or public 

policy, (2) pro rata clauses are not unlawful per se, (3) the 

policy forms, rate structures and benefit schedules were approved 

by the insurance commissioner, and (4) McCarter has failed to 

carry his burden of proof that the clause is invalid. Additionally Glacier argues that the insurance would not have been written 
without the pro rata clause, and the court should not rewrite 

the policy contrary to the intention of the parties. 

Section 40-3512 (3) , R.C.M. 1947, Montana's unfair discrimination statute provides in pertinent part: 

"No such insurer shall make or permit any unfair 

discrimination either between insureds or property 

having like insuring or risk characteristics * * * 

in the premium or rates charged for insurance, or 

in the dividends or other benefits payable thereon, 

or in any other of the terms and conditions of the 

insurance." 

The purpose of such unfair discrimination statutes is to 

establish and maintain uniform rates of insurance. 44 C.J.S., 

Insurance, g 342, p. 1308. The charging of excessive premiums 

constitutes discrimination against the insured. Fogg v. Morris 

Plan Ins. Soc., 188 N.Y.S. 867; 5 Couch on Insurance 2d, 5 30:60, 

p. 579; 43 Am Jur 2d 559. Here McCarter was charged the same 

premium as another insured who carried no other crop insurance, 

but the benefits payable to him would be only a part of those 

payable to another insured without other crop insurance. There 

is a clear violation of the unfair discrimination statute under 

such circumstances and the district court so found: 

"5. That as between McCARTER, who carried other 

multiple peril crop insurance upon his crops, and 

any other insured farmer like McCARTER, but who 

did not carry other multiple peril crop insurance 

upon his crops, the two insureds had like insuring 

and risk characteristics, and GLACIER did cause to 

be made and permitted unfair discrimination between 

such insured in offering to pay substantially less 

benefits to McCARTER than those to be paid to other 

insureds for the same losses, but who had no other 

multiple peril crop insurance, all by virtue of the 

inclusion of the pro-rata clause in the policies of 

insurance in question." 

This makes the pro rata clause unlawful in the instant case as 

it is "Contrary to the policy of express law, though not expressly prohibited. " Section 13-801 (2), R.C.M. 1947. 

Glacier next argues that pro rata clauses are not unlawful per set but on the contrary are valid and enforceable. This 
is clearly the law. 16 Couch on Insurance 2d, 5 62:26, and 

cases cited therein. But this argument is irrelevant. The 

vice here is that McCarter was charged a premium based on "full 

risk" insurance while the policy provided only for proportional 

or pro rata payment of the loss. Glacier's agent, Russell, testified that the premium structure for multiple peril crop insurance 

was established by company actuaries to cover a full loss to those 

insureds who had no other insurance. The agreed facts state that 

Glacier charged the same premium to an insured regardless of 

whether or not he had other crop insurance, and that McCarter was 

charged the same premium that he would have been charged had he 

not carried Federal Crop Insurance. The district court provided 

as a finding of fact: 

"4. That the premium charged McCARTER by 

GLACIER on the insurance policies in question 

was fixed and determined by GLACIER'S actuaries 

in an amount so as to cover a full risk of loss 

to an insured under the policies, who had no other 

insurance coverage, including Federal Crop Insurance coverage, to pro-rate with GLACIER'S policies." 

Although pro rata clauses are not unlawful per se, such clause 

is unlawful here because a "full risk" premium was paid and 

only a partial recovery was possible under the pro rata clause. 

The approval of the policy forms, rate structure, and 

benefit schedule by the office of the insurance commissioner does 

not validate an otherwise invalid pro rata clause. Sullivan 

and Miller v. Doe, 159 Mont. 50, 495 P.2d 193. 

Finally Glacier argues that McCarter has not carried 

his burden of proving the pro rata clause invalid here. The 

basis of this contention is that McCarter produced no evidence 

of the absence of a rational basis for differentiating between 

insureds who have no other crop insurance and insureds having 

additional crop insurance, and accordingly there may well be a 

reasonable basis for charging both the same premium. Suffice 
it to say that the record discloses the same premium charged 

both classes of insureds with one class being paid substantially 

higher loss benefits than the other. This constitutes prima 

facie evidence of excessive premium charges to insureds with 

like insuring or risk characteristics and the district court so 

found . 

Our holding on the first issue renders consideration of 

the second issue unnecessary. 

Judgment affirmed. 

Justice